The two decades after World War II saw incredible success for the american auto industry. Profits soared and technical innovation clipped along at a rapid pace. This success was
unlikely unanticipated, considering that the U.S. was coming out of a costly war and millions of men and women would be flooding a barren job market. The opposite, however, occurred. Demand soared for cars, in large part because new production had ceased during the war leaving the used car market barren. This drove the demand curve for new cars out, pushing up the price and increasing the quantity.
This increase in demand, it seems, was the leading factor in spurring the success of the auto industry in America and the innovation which that success sparked. While the “Big Three” continued to consolidate their market share during this period, they started producing more diverse lineups. According to Rudi Volti, in 1951 Chevrolet only produced one basic car body, with minor trim differences separating the models. However, by 1958 Chevy was producing eight differentiated models. This product differentiation can be credited to the public’s thirst for different, new styles.
Beyond creating new and exciting models, the “Big Three” also began creating more and more advanced cars technologically. The V-8 took over as America’s favorite engine and they continued to become larger and more efficient. Technological advances, however, only reflected what the public demanded. With little government regulation, safety was far from a priority in the eyes of the major car companies. Seat belts could be purchased as an optional extra, but this option was rarely exercised. The same was true of recessed steering wheel hubs, breakaway rearview mirrors and crash-proof locks. The demand simply was present for these features, despite their benefits being, potentially, incredibly high. Eventually, after the risks of not having these features became apparent, the government was forced to step in and regulate their use.
Increased demand for cars also translated to cars’ complement goods. For instance, the national highway system was supported by a great number of interests ranging from average consumers to the military to commercial interests. This public good was then funded, through tax dollars, with strong support from all these interests. Similarly, franchised motels and fast food chains became popular due to the proliferation of road trips. Consumers wanted places to stay and eat that they recognized and could trust. Accordingly, nationwide chains sprouted up along popular high way roots to meet this demand. The rise in demand for these complements provides an example of the external effects that the proliferation of personal cars had on American culture and the American economy.